Shares of Brookfield Property Partners LP (BPY) have been weak to concerns about a soft 3Q2018 and investors shying away due to concerns about the high leverage, extermal management, rising interest rates and pessimism about propects for the Retail (GGP) portion of the business.
Brookfield Asset Management (BAM) is likely to take advantage of this dip in BPY and could increase its ownership stake in BPY from 53% to 60% or more over the course of next few months.
It is yet to be seen if BAM 's plan for re positioning and redevelopment of GGP assets will be successful or not. There is also some risk in terms of whether BAM and BPY can sell select GGP assets at good valuation over next 12 to 24 months to deleverage the balance sheet as planned.
BAM will need to execute flawlessly over next year to strengthen BPY balance sheet. Brexit related pessimism (BPY has significant UK assets including 50% ownership in Canary Wharf and assets in Central London) and fear of rising interest rates and BPY having 37% of debt exposed to variable rate mortgages are a factor to consider.
Time will tell but odds are in favor of BAM succeeding in its plans for BPY and realizing unit price of $30 over next 3 years.
Wednesday, November 21, 2018
Wednesday, October 17, 2018
FB at $150 - An Attractive Entry at 20 Times Forward Earnings
Facebook (FB) at $150 is trading at a very attractive entry point at 20 Times Forward Earnings.
FB is valued at ~$400B excluding excess cash which is a very attractive price for a dominant company in its industry of Social Networking and Advertising. FB has strong products including FaceBook, Instagram, Whatsapp, Messenger. Instagram and Whatsapp will be monetized over the coming years. FB also has 19% market share in the fast growing online advertising space with GOOGL having 37% share and AMZN catching up with 5% market share.
Even assuming reduced margins going forward for FB due to increased spending for security and impact of regulations for a company that can grow revenue and earnings 20%+ for next 5+ years $150 and $400B excluding cash is an attractive price. Any additional innovation by FB can add additional upside. Projected FB target price 3 to 5 years out from Oct 2018 is $250 to $350.
FB is valued at ~$400B excluding excess cash which is a very attractive price for a dominant company in its industry of Social Networking and Advertising. FB has strong products including FaceBook, Instagram, Whatsapp, Messenger. Instagram and Whatsapp will be monetized over the coming years. FB also has 19% market share in the fast growing online advertising space with GOOGL having 37% share and AMZN catching up with 5% market share.
Even assuming reduced margins going forward for FB due to increased spending for security and impact of regulations for a company that can grow revenue and earnings 20%+ for next 5+ years $150 and $400B excluding cash is an attractive price. Any additional innovation by FB can add additional upside. Projected FB target price 3 to 5 years out from Oct 2018 is $250 to $350.
Wednesday, September 26, 2018
Amazon Continues to Innovate with Alexa and Echo Product Updates
Amazon (AMZN) continues to Innovate with Alexa and Echo Product Updates.
Products and Updates released include:
Products and Updates released include:
- Echo Dot
- Echo Plus
- Echo Show
- Microwave Echo/Alexa Enabled
- Echo Auto
- Smart Plug Echo/Alexa Enabled
- Wall Clock Echo/Alexa Enabled
- Alexa Guard
- Ring Security Cameras
- Fire TV Recast
- New Alexa capabilities - Hunches
- Echo Link Amp and Echo Link Audio Equipment
With a growing moat and expanding customer engagement with Amazon Prime, Video, Advertising, AWS & Cloud Services, Alexa, Whole Foods etc. an expanded addressable market of $10+ Trillion makes a path of eventual AMZN Equity valuation of $2T eventually feasible. AMZN current trades at $1950 per share with a market cap of ~$950B.
AMZN also could be looking to open 3000 stores in US over next 5 years with its revolutionary store concept and this could help with better engagement with users and expansion into additional end markets including Medical, Food Services, Travel etc.
Brookfield Asset Management Primed for Growth
Brookfield Asset Management (BAM) had its Annual Investor Day Presentation presentation on 26th September 2018. Aseets Under Management (AUM) reached $300+B for the first time in its history with Fee Paying Assets Under Manement (FP AUM) trending to ~$130B.
With operations in 30+ countries and a growing investment footprint across Real Estate, Infrastructure and Private Equity the company is at the cusp of explosive growth over the next 5 years. BAM raised $20B in the last 12 months and invested a staggering $33B in the last 12 months. The quality of assets purchased mostly in US, Canada, Brazil, Germany, India demonstrate that value investing is possible even when the Equity and Debt Capital Markets are at a peak. The distinguishing size of BAM and its large scale capital, operating expertise and the ability to make synergistic acquisitions and management with ownership mentality and long term focus are key competitive advantages that make this possible.
Some of the high quality investments of BAM over the last 12-24 months are as below:
With operations in 30+ countries and a growing investment footprint across Real Estate, Infrastructure and Private Equity the company is at the cusp of explosive growth over the next 5 years. BAM raised $20B in the last 12 months and invested a staggering $33B in the last 12 months. The quality of assets purchased mostly in US, Canada, Brazil, Germany, India demonstrate that value investing is possible even when the Equity and Debt Capital Markets are at a peak. The distinguishing size of BAM and its large scale capital, operating expertise and the ability to make synergistic acquisitions and management with ownership mentality and long term focus are key competitive advantages that make this possible.
Some of the high quality investments of BAM over the last 12-24 months are as below:
- GGP Inc. ($15B Equity)
- Westinhouse Electric ($1B Equity, $4B Enterprise Value)
- Forest City Realty ($6.5B Equity, $11B Enterprise Value)
- Enbridge Natural Gas Gathering Pipelines ($3.3B Equity)
- Enercare ($3.3B Equity)
- Asciano Ports and Logistics ($3.4B Equity, 50% ownership and select assets 100%)
- NTS Brazil Natural Gas Pipeline ($5.2B Equity overall, 90% ownership)
- BRK Ambiental Brazil Water Services Utility ($0.9B Equity for 70% ownership).
- Potsdamer Platz in Berlin (Price Not Disclosed)
- Powai Mumbai India Office Park ($1B Equity)
- TerraForm Power and TerraForm Global ($1.5B Equity)
- Isagen Colombia Hydro Assets ($2.2B Equity), Gas Natural Columbia Transmission Assets ($1.2B Equity)
BAM is Primed for Growth over the next 5 years and price could reach from $42 recent price to a target price of 80 to $100 per ($80B to $100B Market Capital) if estimated growth in AUM, Fees and Growth in Invested Capital pans out.
Tuesday, August 14, 2018
Facebook Slowing Growth Could Lead to Better Investing Entry Point
Facebook (FB) Slowing Growth Could Lead to Better Investing Entry Point in 2019.
FB revenue growth might slow from 40% to the 20-30% growth as the company matures, user growth stalls (in US & Europe) and expenses ramp up due to increased spending on Investment in Security and Regulations.
A price per share of $150 when forward EPS is projected to be $9 offers an appealing risk reward in our opinion. FB 2018 EPS projected is $7+ and currently shares trade between $165 to $185.
FB revenue growth might slow from 40% to the 20-30% growth as the company matures, user growth stalls (in US & Europe) and expenses ramp up due to increased spending on Investment in Security and Regulations.
A price per share of $150 when forward EPS is projected to be $9 offers an appealing risk reward in our opinion. FB 2018 EPS projected is $7+ and currently shares trade between $165 to $185.
Brookfield Business Partners Update - Westinhouse Purchase & Graftech Monetization
Brookfield Business Partners (BBU) Closes Westinhouse Purchase which Equity Investment of $420M. This investment over the next 3-5 years has the potential to be a 5 to 10 bagger if Brookfield can expand the service offering and add enhance customer service and broaden the portfolio with synergistic acquisitions.
BBU has started monetizing the Graftech investment which has been a 10 bagger so far worth a total of $2.7B so far. Prospects are good to monetize the North American Palladium investment as well over the next 1-3 years.
Company continues to progress the business plan at BRK Ambiental, Greenergy, Canadian Gaming and Gas Station Assets, Teekay Offshore etc. The Construction Services business Multiplex has been disappointing and will likely take 1-2 years more to turnaround and get to stage of providing dividends to BBU.
Target price for BBU is $50 by 2019 end and the growth prospects are very strong over next 5 years.
BBU has started monetizing the Graftech investment which has been a 10 bagger so far worth a total of $2.7B so far. Prospects are good to monetize the North American Palladium investment as well over the next 1-3 years.
Company continues to progress the business plan at BRK Ambiental, Greenergy, Canadian Gaming and Gas Station Assets, Teekay Offshore etc. The Construction Services business Multiplex has been disappointing and will likely take 1-2 years more to turnaround and get to stage of providing dividends to BBU.
Target price for BBU is $50 by 2019 end and the growth prospects are very strong over next 5 years.
Brookfield Asset Management 2Q2018 Update
Brookfield Asset Management (BAM) 2Q2018 results were on trend as expected.
Total AUM was $287B, Fee Bearing Capital increased 12% to $129B, Fee Related Earnings increased 34% to $1.1B and Annual run rate of Fees plus Target Carry increased 23% to $2.6B.
In the last few months BAM have advanced or completed a number of large transactions – including the acquisition of the balance of GGP for $15 billion, a large mid-stream natural gas gathering system in western Canada for $3.3 billion, the closing of the acquisition of Westinghouse Electric Company for a total purchase price of $4 billion, the commitment to acquire Forest City Realty Trust and Enercare for $6.8 billion and $2.5 billion, respectively, and the acquisition of a number of solar and wind facilities in Spain for $1.2 billion.
Brookfield is in the market to raise the next Real Estate Fund and Private Equity Fund and plans to start raising the next Infrastructure Fund from 4Q2018.
We believe BAM shares are worth $50 today with $22 attributed to Asset Management Franchise and $28 attributed to Balance Sheet Assets. It is likely that growth over next 4-5 years will lead to $80+ with Asset Management Franchise worth $40 and Balance Sheet Assets worth $40.
Brookfield 2Q2018 Results
Total AUM was $287B, Fee Bearing Capital increased 12% to $129B, Fee Related Earnings increased 34% to $1.1B and Annual run rate of Fees plus Target Carry increased 23% to $2.6B.
In the last few months BAM have advanced or completed a number of large transactions – including the acquisition of the balance of GGP for $15 billion, a large mid-stream natural gas gathering system in western Canada for $3.3 billion, the closing of the acquisition of Westinghouse Electric Company for a total purchase price of $4 billion, the commitment to acquire Forest City Realty Trust and Enercare for $6.8 billion and $2.5 billion, respectively, and the acquisition of a number of solar and wind facilities in Spain for $1.2 billion.
Brookfield is in the market to raise the next Real Estate Fund and Private Equity Fund and plans to start raising the next Infrastructure Fund from 4Q2018.
We believe BAM shares are worth $50 today with $22 attributed to Asset Management Franchise and $28 attributed to Balance Sheet Assets. It is likely that growth over next 4-5 years will lead to $80+ with Asset Management Franchise worth $40 and Balance Sheet Assets worth $40.
Brookfield 2Q2018 Results
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